{"type":"document","data":{"id":"979c3e42-4870-48dc-b77b-3411ab8e280c","localeString":"en-GB","publishDate":"2024-11-22T11:19:29.096+01:00","contentType":"onecms:editorialPage","hasMacro":false,"flexPageMetadata":{"afmBanner":false,"robotInstruction":{"noIndex":false,"noFollow":false},"description":"Discover how market events could impact your investments."},"mainHeaderZone":{"componentType":"editorialHeader","coreHeader":{"title":"Important Market Update -  Impact of Donald Trump's return to the White House on the financial markets","headerImage":{"transformBaseUrl":"https://assets.ing.com/transform/b4eb768d-c5f7-4780-9680-703e4c4bcba3/US-flag","type":"image","width":800,"original":"https://assets.ing.com/m/72b090503cbc7b7b/original/US-flag.jpg","extension":"jpg"}},"backLink":{"textLink":{"url":"/en/individuals/news/economy-and-financial-markets","text":"News"}},"date":"2024-11-22","readingTime":3,"authorInfo":{"authorName":"Frédéric Degembe","jobTitle":"Chief Investment Officer","image":{"transformBaseUrl":"https://assets.ing.com/transform/58b9bd7e-d0e3-4344-ad87-60eb2ad01149/Frederic-Degembe","type":"image","width":8256,"original":"https://assets.ing.com/m/23fe2dc9884603b5/original/Frederic-Degembe.jpg","extension":"jpg"}}},"flexZone":{"flexComponents":[{"componentType":"sectionTitle","title":"The American elections delivered their verdict a few weeks ago. Is there any further news today? What impact will a Republican victory have on the economy?"},{"componentType":"paragraph","richBody":{"value":"<ul><li>Donald Trump aims to implement an expansionary economic policy. Measures such as tax reductions, mainly for companies, should boost US activity in the second half of 2025.</li><li>For Europe, Donald Trump is less positive news, as he intends to raise customs duties on imports. Europe, which is highly dependent on its exports, will suffer from this.</li><li>What&apos;s more, Trump&apos;s main policy orientations are proving to be rather inflationary. Reducing immigration will tighten the labor market. And raising import customs duties will lead to higher prices. This means that the Fed will have little room for manoeuvre when it comes to cutting down interest rates. On the other hand, the European Central Bank is likely to lower its rates further, due to potentially weaker growth. These contrasting trends indicate a strong dollar in 2025.</li></ul>"}},{"componentType":"sectionTitle","title":"What is the ING fund managers' opinion and their investment strategy?"},{"componentType":"paragraph","richBody":{"value":"<ul><li>Now that the presidential election is over, the stress on the markets has eased significantly. This is reflected in the volatility of US equities, as measured by the VIX index, which has dropped by almost 30%.</li><li>This indicates great potential for US equities. History shows that in the year following US presidential elections, whatever the outcome, the S&amp;P 500 tends to climb, with an average profit of 6.7%. It even recorded an 18% rise after Trump became president in 2017!</li><li>We expect assets that are more sensitive to variations in interest rates to perform best:<ul><li>Shares in the technology and communications services sector</li><li>Small market capitalization (small-caps)</li><li>Corporate bonds</li><li>Real estate</li><li>Precious metals.</li></ul></li><li>On a regional level, we continue to favor the United States, which is reaping the benefits of the boom in artificial intelligence, with profit growth expected to rise by 13% next year.  </li></ul>"}},{"componentType":"sectionTitle","title":"Update of the 06/11/2024"},{"componentType":"sectionTitle","title":"Stocks should benefit from lower volatility…"},{"componentType":"paragraph","richBody":{"value":"<p>​​​​​​As American voters have decided to give the keys of the Oval Office back to Donald Trump and the worst fears of a very close, or even contested, result have not materialised, investors should now expect <strong>lower volatility</strong> - the VIX index, which measures the volatility of the S&amp;P 500, is about 50% above its average level from January to July - and <strong>good stock market returns</strong>. History shows that in the year following US presidential elections the S&amp;P 500 averaged a gain of 6.7%, regardless of the outcome of the election. The best year was a surge of 29% in 2021 after Biden’s election, followed by 26% and 20% for Barack Obama in 2013 and 2009, and 18% for Trump in 2017.</p><p>As the election risks are removed, markets should focus more squarely on borrowing conditions and earnings trends as their guide. And in this respect a new Trump presidency, potentially in combination with Republican majorities in both houses of Congress, should be <strong>positive for US risk assets</strong>. As in Trump 1.0, the pursuit of corporate tax cuts, deregulation, and tariff hikes would be good for US stocks and corporate bonds, even if this may lead the Federal Reserve to cut rates less than expected. Also, like the first term, <strong>his policies would be less good for sovereign bonds </strong>as it would increase the national debt and lead to an inflationary bump and push up bond yield. </p><p>As mentioned in our previous communication, <strong>banks, healthcare, defense, fossil fuel companies, cryptocurrency stocks, or smaller companies </strong>should outperform clean energy and electrical vehicles companies, as well as battery makers, or companies with high revenue exposure to China under the Republican presidency.</p>"}},{"componentType":"sectionTitle","title":"… and encouraging earnings growth"},{"componentType":"paragraph","richBody":{"value":"<ul><li>Profits accelerating is far more important for the markets than who is sitting in the White House! Since 1928, 67% of years with positive earnings per share growth saw the S&amp;P 500 rise, while the US index appreciated 43%/57% of the years when the Republicans/democrats were in power, according to Bank of America.</li><li>And what we are seeing is precisely that the earnings upcycle is underway, due to a resilient US economy and as the burden of restrictive monetary policy draws closer to an end thanks to lower inflation. The S&amp;P 500 is set to deliver another year of robust earnings growth in 2025 (+13% vs 10% in 2024), according to the market consensus.</li><li>The US ‘Magnificent Seven’ – NVIDIA, Microsoft, Alphabet, Amazon, Apple, Meta and Tesla - keep growing profits at a rate (+143% in 2024, according to analyst forecasts compiled by Bloomberg) that the rest of corporate America (-5.5%) can only envy. But for next year, the gap in earnings growth between the Magnificent Seven (+17%) and the rest of the market (+12%) should narrow, allowing the US stock market rally to broaden and enabling Wall Street to continue outperforming other stock markets.</li><li>At global level, consensus projections for the 12-month forward earnings per share growth also continue to trend up (+11%), with the potential for further upside if the China recovery does take off. In this context, we believe the uptrend in equities is unlikely to be derailed anytime soon.</li><li>As 70% of central banks are in an easing stance and the global earnings profile is considerably more upbeat with no signs of a US recession, assets more sensitive to rate changes (such as stocks in the technology and communications services sector, small caps, corporate bonds, real estate or precious metals) likely have room for further upside in the coming months.</li><li>The key risk to our view is geopolitical tensions spiraling into an oil shock - which has, in the past, brought an abrupt end to many uptrends (Yom Kippur War: 1973; Second Oil Crisis: 1979; Gulf War: 1990) - and a policy error morphing into a hard-landing.</li></ul>"}},{"componentType":"sectionTitle","title":"More info?"},{"componentType":"paragraph","richBody":{"value":"<p>For a better understanding of the economic situation, find financial, economic, social and political analyses from our economists.</p>"}},{"componentType":"cards","cards":[{"componentType":"productCard","cardType":"product","cardSize":"small","title":"Economy and financial markets","intro":"Want to know the latest economic and financial news? And more importantly, the impact on your money? Our experts decypher the latest developments via podcasts, videos and analyses.","image":{"transformBaseUrl":"https://assets.ing.com/transform/1460d10d-7e43-46dd-84a0-7f5cdf39dfbc/my-news-overview-1920","type":"image","width":1920,"original":"https://assets.ing.com/m/4f0272f005d6439e/original/my-news-overview-1920.jpg","extension":"jpg"},"link":{"url":"/en/individuals/news/economy-and-financial-markets"}}]}]}}}